There are so many facets of the shuttle-bus-to-Silicon-Valley story that fascinate me. The fact that people are willing to commute a fair distance to be able to live in San Francisco while working for tech companies 60 miles away has big implications, and not just for the bus drivers who are in the news this week.

The headline story right now is of course that of the drivers who shuttle workers from the city to their workplaces at companies like Yahoo!, Apple and Genetech have decided to unionize, and will be represented by the Teamsters. This follows an earlier move by Facebook shuttle drivers to do the same thing. The workers have various issues – split shifts are at the top of the list – and feel that unionization is their best option. The tech companies do not seem to mind one way or another, although of course they will be the ones that eventually pay for any wage hikes.

The spin that is being given to the story is that it is about wage inequities, and to be sure there is some of that. Silicon Valley, like many boom towns, is a victim of its own success. Its mega-successful companies employ highly paid staff, who of course have driven up property values to astronomical levels. The people who clean their houses and serve up their lattes also get paid more than they would elsewhere, but not enough to live well close to the boom. It is an old story, one that has its roots decades ago.

The newer story is that many Silicon Valley workers – the ones getting those outrageous paychecks – are also choosing to live elsewhere, and particularly in cosmopolitan San Francisco. Of course, the workers are not exactly choosing San Francisco because it is cheap – last summer the median price for a single family home in the city hit $1 million for the first time, making it the most expensive place in the U.S. to live – but rather because it is not outside their reach and it is a cool city to live in. Of course, commuting could be an absolute nightmare, which is where the buses come in. Given that they can use carpool lanes, they take a bunch of time off commutes, and given that they offer Wi-Fi and other amenities they are presumably pretty comfortable. A great solution for every right? Well, apparently not.

The problem is that it isn’t fair. How is it that some employees get to live in pretty townhouses and apartments with a view of the Bay, get shuttled to work, take home big pay packages and live the good life – and others do not? How is that fair? That is the interpretation of protesters who have been taken the bus ‘issue’ to heart over the last year or so, and who are particularly irked that the tech workers are driving up San Francisco’s already nuts housing prices (particularly around the tech bus stops, go figure).

The answer, of course, is that the economy rewards some skills more handsomely than others. It actually isn’t all that fair that LeBron James brought in north of $70 million last year because he is good launching a ball into a basketball net, or that Kim Kardashian raked it about $28 million for her skills (and I’m not sure what they are actually). And it actually isn’t fair, either, that elderly people who bought in San Francisco decades ago are now raking in stratospheric gains on any properties that they buy, while younger people are finding it almost impossible to get into the market at all.

The real problem, and it is a legitimate one, is that there is a growing feeling that those who are not basketball players or reality TV stars or tech workers cannot even get a toehold into the good life. It is not even just a feeling either, since there are real reasons to believe that income inequality is growing. That in itself causes social issues, as well as really not being a sign of an economy growing in the best way that it could.

And so the bus drivers have become a symbol of all of it. They are not highly paid per se (I’ve seen estimates of their earnings being around $18 an hour) and many complain that working split shifts makes for very long days (although presumably not longer than the people who they are shuttling, who are also not ‘off’ between commutes). If everyone is happy that they are unionizing, that’s all good.

But make no mistake: the economy lots-of-goodies-for-some economy is in full blast, and negotiating higher pay for some workers is not going to make much difference to it. San Francisco and Silicon Valley may be the canary-in-the-coal mine right now, but there will be lots more examples to come – fair or not.

Was it all big one fun, Technicolor roller-coaster ride never to repeated? The economic growth of the past fifty years was awesome, at least in a historical context. Question is, was it a one-time-only, and are we destined to go back to the sluggish economic pace that the world experienced before then, and which is going to be nowhere near quick enough to lift incomes in the way to which many countries have become accustomed?

The debate over how fast the global economy can grow is a big one, and the answer is critically important. The consulting firm McKinsey is the latest to analyze the challenge in a new piece just released, and like everyone else, they acknowledge that we are at a crossroads in economic development. What it comes down to is this: there are only two ways to create economic growth. One is through people working, which is best facilitated when you have lots of young workers in relation to children and the elderly. The other is through productivity, or figuring out snazzy new ways to get things done. Given that most of the developing world is facing a rapidly aging population and mounting health care bills, it is the second path to expansion that we are going to be most reliant upon in the decades ahead.

McKinsey puts some numbers on the whole thing, figuring that global employment will grow by 0.3 percent annually over the next 50 years, in contrast to about 1.7 percent between 1964 and 2014. Assuming that productivity growth matches its average over the past half century (about 1.8 percent, which was pretty good) that will mean that global growth ends up 40 percent lower over the next five decades than it was over the last five. That is not a good thing if you are trying to raise incomes and standards of livings.

So how do you fix it? Well, not easily but the way you presumably could would be through raising productivity. That’s an annoyingly vague prescription, but in practice it means innovating through adopting new practices. McKinsey found that three quarters of that potential growth can come through just adopting existing best practices or catch up improvements, while the rest has got to come from finding exciting new ways to do things. If that sounds a little desperate (well, it does to me) we should remember that that is effectively what has happened over the past, so surely it can happen again.

Attention interest rate watchers: Walmart is raising wages so the U.S. Federal Reserve is likely to be hiking interest rates. It is not as simple as that, but it kind of is actually.

In case you missed it, here is the New York Times’ take on Walmart’s move. Basically the company is raising the wages of its lowest level retailer workers to $9 this year (the U.S. minimum wage is $7.25) and taking that that to $10 next spring. They also plan to pay $13 for Department Managers this year, and $15 next. In total, it is a move that is going to cost the company a cool $1 billion.

I don’t want to go over the top and say it is the economic story of the year that Walmart is raising wages, but I’d say its close. The fact that the largest retailer in the world is upping compensation is significant on so many levels, and as economic indicators go it is a huge one. Let’s say it is the story of the quarter, at least.

Walmart is not raising wages to be nice. Yes, they have gotten bashed for not paying enough, and yes they will get some decent publicity because of the move. But $1 billion for good PR is pretty expensive, even for Walmart. I’d say that the good PR is a secondary benefit of the pay upgrades, not the primary reason for them.

Walmart is raising wages because the U.S. labor market is tighter than it was a year ago, and you can get better employees if you pay more. There is competition for workers, apparently, even at the lowest levels. That is the huge news, and don’t think that a lot of people aren’t noticing.

People like Janet Yellen over at the Federal Reserve, for example. The Fed has been mulling when to raise rates, and Ms. Yellen (she’s the Chair, so what she says matters) has hinted that the first move might be as early as June. Or it could be later – the communiqué that came with the last Federal Reserve decision used the word ‘patient’ to describe the Fed’s attitude to when to hike. Too early, and you could destroy that nice little economic expansion the U.S. has going. Too late and you could unleash the inflation genie, and no central banker wants that.

Which is where Walmart comes in. Throwing a billion into wage bills is not going to throw the whole U.S. inflation picture out of whack, but if Walmart is indicative of a lot of the rest of retail – and of a lot of the rest of U.S. companies – then we are talking about some serious money. As of the end of 2014, employment costs were not a big deal: as measured by the U.S. Labor Department, over the twelve months ended in December, they were up by 2.2 percent. That is higher than the 1.9 percent experienced in 2013, but certainly not back to the pre-recession average of 3 to 4 percent. Still, given the recent decline in the U.S. unemployment rate to 5.7 percent (it was 6.6 percent a year ago, and close to 10 percent in 2010) there is clearly going to be pressure for higher wages.

So there is good news for the Walmart employees, and good news for the American economy too. As we know, however, central bankers hate good news so let’s start the countdown to the first punchbowl-snatching, interest rate hike which is surely soon to come.

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There are so many facets of the shuttle-bus-to-Silicon-Valley story that fascinate me. The fact that people are willing to commute a fair distance to be able to live in San Francisco while working for tech companies 60 miles away has big implications, and not just for the bus drivers who are in the news this […]

Was it all big one fun, Technicolor roller-coaster ride never to repeated? The economic growth of the past fifty years was awesome, at least in a historical context. Question is, was it a one-time-only, and are we destined to go back to the sluggish economic pace that the world experienced before then, and which is […]